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Can the Lieberman-Kerry Bill Really Lead to Transformational Energy Reform?

The energy bill unveiled in the Senate earlier this month has begun to attract big attention from energy reform and industry interests, especially in the light of the recent Gulf Coast deepwater oil spill. It's not yet clear what the bill's prospects at passing are; according to The New York Times on May 20, "Majority Leader Harry Reid (D-Nev.) said earlier this week he will huddle next month with key committee leaders and the entire 59-member Senate Democratic caucus to determine what type of energy and climate bill has the votes to pass off the floor this year." But Associate Professor David Spence of the Department of Information, Risk and Operations Management at McCombs theorizes in a recent Energy Brief that there are good reasons to suspect that Congress will have a particularly difficult time passing the kind of transformative legislation that advocates of fundamental energy reform favor. And those reasons are based far more on rational (if not necessarily beneficial-to-society) behaviors than some might imagine.

"When studying Congressional behavior, political scientists often assume that (i) while members of Congress are motivated by a mix of goals, the desire to be reelected is preeminent among them; and (ii) voters are rationally ignorant — that is, they remain relatively uninformed about most policy decisions, and delegate the process of making informed decisions to their elected representatives. Therefore, for each policy choice a legislator faces, including questions of energy policy reform, she must try to anticipate the electoral risk of her action alternatives. That calculation, in turn, will depend upon several factors, including: (a) the legislator’s electoral vulnerability (the safety of the legislator’s seat and the reservoir of trust, or leeway, the legislator has developed among her constituents), (b) how salient the issue is to voters (how much voters know about the issue, and how likely it is that voters will become aware of the legislator’s choice), (c) voters’ preference intensity (that is, how important the issue to voters relative to other issues on which the legislator has taken a position), and (d) the traceability of the consequences of the vote, both negative (the risk of blame) and positive (the ability to claim credit). All else equal, rational legislators tend to respond to the activated portions of their constituency, those voters to whom an issue is particularly salient or important. ...When legislators attend to the interests of these highly motivated, better informed minorities, Congress can produce decisions that deviate from majority opinion, or from the fully informed preferences of the median voter."

Still, Spence notes, there have been times when “political entrepreneurs” find a way to activate the general public so as to overcome entrenched local interests, producing major regulatory legislation (like the Clean Air Act). What makes him so skeptical about energy reform today, then?

"...both the issue environment and the political environment are different now than they were in the 1970s. Organized interests have even more at stake now than they did then, and the central issues in the energy policy debate are, technically and politically, more complex now than then. It was easier for voters in 1972 to see how the Clean Water Act would clean up their rivers and lakes than it is for today’s voters to see how the ACES bill will improve their lives. Greenhouse gases are invisible, and they do their damage to humans indirectly. Moreover, members of Congress know that while their constituents will bear all the costs of the regulations they enact, the beneficiaries of that regulation will include others–future generations who cannot vote for or against today’s legislators, as well as citizens of other countries who will benefit from avoided climate change. All of which makes a strong energy policy reform in 2010 much more difficult to produce than the regulation of the 1970s. Of course, the only constant in politics is change: if the costs of reliance on fossil fuels or the benefits (avoided costs) of legislation become more evident and salient to voters over time, the political calculus could shift, improving the chances of the general public overcoming entrenched local interests, producing major energy legislation."

Read Spence's Energy Brief at the Energy Management and Innovation Center's site. Read McCombs Finance Professor Sheridan Titman's interview with Spence for more discussion of the state of energy policy the Senate energy bill.


#1 Andrea, I'm glad you liked

Andrea, I'm glad you liked it! I'll make sure to pass your compliment onto him. Elayne

#2 Thank you Prof. Spence! This

Thank you Prof. Spence! This is such a well-written, thought-provoking article. I look forward to reading more from you.

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